River rights

A public private partnership to redevelop an industrial site at the base of the Willamette Falls in Oregon City is mired in conflict. Can the partners pull it off?

Walking through the 22 acres of industrial wasteland at the base of the Willamette Falls in Oregon City is a journey back in time. The hulls of derelict factory buildings that once housed both the largest woolen mill and newsprint producer on the West Coast are like huge museum pieces of Oregon’s industrial past.

The dilapidated infrastructure gives way to a natural wonder few Oregonians get to see up close: the Willamette Falls, North America’s second largest waterfall by volume. A walkway across the top of an old Portland General Electric dam leads to a viewing platform of the falls, which barrel over a drop the height of a four story building.

(Photo Shelter)View of the Willamette Falls from planned viewing platform

Until this year, when public officials started guided tours, the natural phenomenon had been cut off from the public for 150 years. Over more than a century, industry had gradually taken over the land at the base of the falls to build factories that harnessed the power of the water to drive machinery.

That heavy industry is long gone. The last employer, the Blue Heron Paper Company, closed in 2011. Now a partnership between a private landowner and four public agencies to redevelop the site is in the works.

But the talks between the public partners – Oregon City, Clackamas County, Metro and the State of Oregon – and the private landowner, George Heidgerken, whose company Legacy Falls LLC bought the land out of bankruptcy court in 2014 for around $2.3 million, have been strained.

Disagreements between the property developer and the government agencies over the design plans have stalled the project and jeopardized millions of dollars in funds that the state legislature has earmarked for the project.

The Willamette Falls redevelopment is a telling tale of the challenges public private partnerships pose. They are notoriously difficult to pull off. But despite this, such partnerships are on the rise in the U.S. given the constraints on government budgets and the need to repair infrastructure, according to a PwC study.

The recent failure of the public private venture to redevelop the Zidell Yards, a former shipyard, on a 33-acre site along Portland’s south waterfront, is an example of the perils that private business and public agencies face while partnering on economic revitalization efforts.

(Photo Shelter)View of the Willamette River and falls from the industrial site. Across the river is the now closed West Linn Paper Co.

In the case of the Zidell Yards redevelopment, ZRZ Realty, the real estate firm owned by the Zidell family, called off development talks with Portland City officials in June because costs of the project expanded as the scope of the project increased. The city wasn’t willing to pay the extra money in infrastructure costs.

Heidergerken would not go into details about the disagreement he has with the public agencies for the Willamette Falls redevelopment, but he hinted he felt their plan for developing the site encroached on his land.

“I like some of the work they have done. I don’t like it when they move on to stuff they don’t own,” says Heidgerken, who didn’t elaborate.

The public partners have an ambitious plan to build a riverwalk that would guide the public through the rehabilitated industrial site to a viewing platform overlooking the falls. Heidgerken donated an easement for the riverwalk, which would consist of a series of pathways that include gathering spaces and interpretive signs describing the historical and cultural importance of the site.

Part of Oregon City's old Main Street where an opera house and theater once stood

A lot is riding on the success of the redevelopment. A study commissioned by the public partners estimated it could generate $2.3 million in annual tax revenue for Oregon City and Clackamas County; $14 million in annual spending from visitors; and 1,480 permanent full-time jobs when construction is complete.

It is an incredibly challenging project. Developers will have to peel back 150 years of industrial development. Many of the buildings were constructed in layers on top of each other, and are made out of combination of concrete, steel and wood.

The riverwalk alone is expected to cost $60 million. Part of the complexity comes from the planners’ decision to preserve and repurpose some of the industrial buildings to retain the historical character of the property. Planners have identified five historic buildings for preservation, including the foundation of the Oregon City woolen mill opened in 1864, the Hawley Paper Company building and two large mill structures.

The foundation of a former woolen mill

Other impressive industrial buildings, including a large digester structure and the foundations of a flour mill, are slated for preservation.

“We are trying to retain a lot of the history and reveal it so you can see how complex the site is from its geologic history to its social and cultural history, and to its more recent industrial history,” says Brian Moore, Willamette Falls Legacy Project manager for Metro.

Private investment includes a hotel, commercial office space, apartment buildings, restaurants and retail space, though nothing permanent has been proposed for the restored buildings, says Moore.

Sphere slated for preservation

An added complexity is the site clean-up. The public agencies are responsible for demolishing and cleaning up any buildings that fall within the riverwalk. Moore said the site contains hazardous materials such as asbestos and lead-based paint, though this is typical for an industrial area. The public agencies have also found leaking underground storage tanks and contaminated soil that will need to be removed.

When Heidgerken bought the site, he also purchased all of the contamination liabilities rather than entering into agreements with the EPA that could have shielded him from those liabilities, says Moore.

For his part, Heidgerken says he is not concerned about the environmental risks.

Last year, the property developer hesitated to authorize permits for the first stage of the riverwalk construction, as well as pay taxes and utility bills until his concerns were met. “We had disagreements about the overall design and he [Heidgerken] had questions about what he could and could not do with the riverwalk,” says Moore.

The delay put public funding for the project at risk. The state legislature set a deadline of April 2020 to grant $12.5 million for the riverwalk. For the funds to be released, the partners have to be clearly underway with construction of the first stage of the project. This put the partners under time pressure because permitting for the project is estimated to take 24 months.

The public agencies offered to buy the property from Heidgerken for $6 million after Falls Legacy LLC expressed concern about moving forward. “The partners had a better sense of the environmental liability of the site and other issues. They made the decision that if Falls Legacy doesn’t want to move forward, the partners would be willing to purchase the site,” says Moore.

A 'Public Yard' is planned as a gathering spot and events space behind the former Blue Heron paper mill property.

Heidgerken declined the offer, believing the site to be worth more.

Though Heidgerken has made certain payments to the agencies to advance the project, he still owes money for design work. The agencies have decided to push ahead with applications for state and federal permits to meet the deadline for the release of state funds.

The public agencies could have avoided such disputes if they had gone ahead and bought the property when it was for sale in bankruptcy court. When the Blue Heron Paper Company went out of business, Oregon City teamed up with Metro to work on plans for redevelopment. As city officials evaluated the site, the costs of redevelopment became more clear.

Tony Konkol, Oregon City’s city manager, said the agencies felt it was the “best option” if a private owner bought the land given the costs of maintaining and securing the site.

“One of the goals as public agencies is to see what we can do to knock down barriers to private investment, what we can do to restore the shoreline and preserve the historical and cultural heritage of the site,” says Konkol.

(Photo Shelter)Tony Konkol, Oregon City city manager, inside the derelict Hawley Paper Company building

Heidgerken is no stranger to redeveloping historical sites by waterways. He owns 35 acres of the historic Olympia Brewery on the Deschutes River in Tumwater, Washington. The site, which includes a more than century old brewery building, is listed on the National Register of Historic Places. Heidgerken and government partners are redeveloping the site into a craft brewing and distilling area.

The developer also owns roughly 400 acres of property that once housed the International Paper mill on the Umpqua River near Reedsport on the central Oregon coast.

The property owner says he has had several offers to buy the Willamette Falls property. “We may or may not sell it,” he says, later adding that he has no reason to sell. “That site will be completed,” he says, emphasizing he would like to see the public agencies move forward.

And despite the challenges, the public partners are doing just that.

“You would be hard pressed to find an opportunity like this,” says Konkol. “The land is too valuable,” for the project to fail, he adds.

VIDEO: Oregon City's city manager describes plans to redevelop an historic building as part of the city's plan to restore public access to the Willamette Falls.